'A ticking time bomb', says US President Joe Biden on China's economy

US President Joe Biden on Thursday called China a “ticking time bomb” because of its economic challenges and said the country was in trouble because of weak growth.

“They have got some problems. That’s not good because when bad folks have problems, they do bad things,” Biden said at a political fundraiser in Utah.

Biden’s remarks were reminiscent of comments he made at another fundraiser in June when he referred to President Xi Jinping as a “dictator.” China called the remarks a provocation.

Those comments came shortly after US Secretary of State Antony Blinken completed a visit to China aimed at stabilising relations that Beijing described as being at their lowest point since formal ties were established in 1979.

China’s consumer sector fell into deflation and factory-gate prices extended declines in July. China may be entering an era of much slower economic growth with stagnated consumer prices and wages, contrasting with inflation elsewhere in the world.

The United States, the world’s largest economy, has fought high inflation and seen a robust labor market.

“China is in trouble,” Biden said on Thursday. He said he did not want to hurt China and wanted a rational relationship with the country.

China loans plunge to 14-yr low, adding to deflation risk

Chinese banks extended the smallest amount of monthly loans since 2009 in July, a further sign of weak demand in the world’s second-largest economy that raises the risk of prolonged deflation pressure. 

New loans reached 345.9 billion yuan in July, the People’s Bank of China said Friday, less than half the 780 billion yuan economists had forecast in a Bloomberg survey. Aggregate financing, a broad measure of credit, was 528.2 billion yuan last month, also well below estimates.

“It is a big disappointment, proving the fragile status of the recovery in China,” said Kiyong Seong, lead Asia macro strategist at Societe Generale. The probability of further PBOC easing in the near term is notably rising, he said.  

The plunge in loans is another sign of weak demand in China, and adds to a raft of negative data recently showing deflation in the economy,  slumping manufacturing activity. 

Bloomberg